Treasurys rise as market debates data, Ukraine

10-year Treasury yield falls to 2.62%

By

BenEisen

NEW YORK (MarketWatch) — Treasury prices rose Tuesday as fears crested over a a conflict in Ukraine, but pared gains toward the end of the session as the market refocused on stronger U.S. economic growth.

Russian forces were seen on the ground in the eastern Ukrainian cities of Slavyansk and Kramatorsk on Tuesday, as Ukrainian forces mobilized to regain control of its eastern cities, according to news reports. The headlines heightened market fears that simmering tensions could boil over.

Stocks sold off on the news, sending investors into haven Treasurys. But equities reversed course just after mid-day and closed higher, pulling some of the bid out of haven government debt.

The 10-year Treasury note
US:10_YEAR
yield, which falls as prices rise, was down 1.5 basis points at 2.623%, after dropping as low as 2.596%, according to Tradeweb. The 30-year bond
US:30_YEAR
yield slid 3 basis points to 3.455%, the lowest yield since last July. The 5-year note
US:5_YEAR
yield was up 1.5 basis points at 1.617%.

“It’s that tug of war between slowdown in China, [geopolitical tensions in] Russia and Ukraine, versus the positive economic data we’ve been getting over the last couple of days,” said Wilmer Stith, co-manager of the Wilmington Broad Market Bond Fund.

“Market participants would like to lean a little short in the Treasury complex, but they continue to have these cross-currents,” said Michael Cullinane, head of Treasury trading at D.A. Davidson & Co.

On Tuesday, the Labor Department said inflation rose 0.2% in March, higher than economist estimates of 0.1%. Prices rose by 1.5% in the prior 12 months, and core prices, which exclude food and energy prices, were up 1.7% over the past 12 months.

Homebuilder confidence edged up to 47 in April from 46 in March, but lagged economist estimates of 50, according to data from National Association of Home Builders/Wells Fargo.

The difference, or spread, between the 5-year yield and 30-year yield fell 4.5 basis points on Tuesday to 1.84 percentage points, nearing its narrowest in five years. Intermediate-term yields are considered most sensitive to shifts in monetary policy.

The spread fell dramatically at the end of March as market participants began to expect the Federal Reserve to hike its key lending rate earlier, following a hawkish interpretation of the central bank’s last press conference.

Fed Chairwoman Janet Yellen said at an Atlanta banking conference that the Federal Reserve is considering rules to address risks in the short-term wholesale funding markets. A call to potentially increase banks’ capital standards was a reminder of the remaining scars from the financial crisis.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.